Previously entitled 'Offshore Oil & Gas Insurance', this new edition is still the comprehensive study on the subject, describing the development of the business and explaining the coverages customarily purchased by oil companies.
Author(s): Sharp, David
Published: Nov 2008
ISBN 10: 1856093514 ISBN 13: 9781856093514
Dedication iii
The Author xi
Foreword xiii
Acknowledgements xv
Author’s Preface xix
Chapter 1 History and Development of the Offshore Insurance Market 1
1.1.0 Background and Introduction 1
1.2.0 Brief History of Offshore Drilling and Production 2
1.3.0 Evolution of the Offshore Energy Insurance Product 10
1.4.0 Development of the Marine Offshore Insurance Market 15
1.5.0 The Petroleum Community 26
1.6.0 Organisation of the Energy Insurance Market 29
1.7.0 Offshore Insurance Law and Jurisdiction 35
Chapter 2 Exploration 1 – Background 41
2.1.0 Introduction 41
2.2.0 Mobile Offshore Drilling Units (MODUs or Rigs) 45
2.3.0 Risk Factors Associated with MODUs 48
2.4.0 The Drilling Operation 51
2.5.0 The Drilling Contract – the Daywork Contract 64
2.6.0 Responsibility for Loss or Damage Under Daywork Contract 66
2.7.0 Footage and Turnkey Contracts 69
Chapter 3 Exploration 2 – Insurances on Mobile Offshore Drilling
Units (MODUs) 71
3.1.0 Introduction 71
3.2.0 The London Standard Drilling Barge Form (9th March, 1972) (LSDBF) 72
3.3.0 Adapted Conventional Hull Policy Wordings 78
3.4.0 The Norwegian Marine Insurance Plan of 1996 (the Norwegian
Plan, or the ‘Plan’) 83
3.5.0 London Market Offshore Mobile Unit Form (LMOMUF) 89
3.6.0 Overview Summary of the Forms 96
3.7.0 Liabilities 97
3.8.0 Liability Coverage in the Conventional Market 102
3.9.0 Market Practice for Mobile Drilling Rigs 103
Photo Gallery 109
Chapter 4 Exploration 3 – Control of Well Insurance 115
4.1.0 Introduction – Blowout 115
4.2.0 Risk Considerations 119
4.3.0 Evolution of the Coverage Form 123
4.4.0 The EED 8/86 Wording (EED) – Overview 127
4.5.0 EED Control of Well – Section A 128
4.6.0 EED Redrilling/Extra Expense (Section B) 132
4.7.0 EED Seepage and Pollution, Clean-up and Contamination – Section C 133
4.8.0 EED Form General Conditions 135
4.9.0 Additional Optional Coverages 142
4.10.0 Overview of LSW 614A (Comparison with EED) 147
4.11.0 Control of Well Premium Rating 149
4.12.0 Market Practice 153
Chapter 5 Offshore Construction (1) 157
5.1.0 Background and Introduction 157
5.2.0 Construction Methods and Phases 158
5.3.0 The Marine Warranty Surveyor (MWS) 169
5.4.0 Contractual Issues and Arrangements 172
5.5.0 Responsibility for Insurance 188
Photo Gallery 193
Chapter 6 Offshore Construction (2) – Essential Principles 199
6.1.0 Introduction to Scope of CAR Policy 199
6.2.0 Assured 199
6.3.0 Period 214
6.4.0 The Insured Works 219
6.5.0 Valuation 220
6.6.0 Coverage Scope 223
6.7.0 Third Party Liabilities 227
Chapter 7 Offshore Construction 3 – The WELCAR 2001 Policyform – General
Conditions and Physical Damage 231
7.1.0 Historic Background 231
7.2.0 WELCAR – Policy Construction 237
7.3.0 Scope 238
7.4.0 General Terms and Conditions 242
7.5.0 Section 1 – Physical Damage 248
Chapter 8 Offshore Construction (4) – The WELCAR 2001 Policy
Form – Terms and Conditions for Section 1 253
8.1.0 Terms and Conditions (Section 1 only) 253
8.2.0 Basis of Recovery 253
8.3.0 Incorporated Clauses 258
8.4.0 Project Alterations and Amendments 261
8.5.0 Defective Parts 263
8.6.0 Additional Expenditures under Section 1 270
8.7.0 Maintenance 277
8.8.0 Other Aspects 279
8.9.0 Definitions for Section 1 281
8.10.0 Exclusions for Section 1 282
Chapter 9 Offshore Construction 5 285
WELCAR Form – Section II (Liabilities) and Marketing
Practice for CAR insurance 285
WELCAR FORM Section II (Liabilites) 285
9.1.0 Introduction 285
9.2.0 WELCAR Section II Third Party Liability – Insuring Agreement 288
9.3.0 Terms and Conditions for Section II 293
9.4.0 Exclusions 295
9.5.0 Coverage Buy-Backs 300
9.6.0 Marketing Practice for CAR Insurance 303
Photo Gallery 310
Chapter 10 Operating Insurance 1 – Principal Considerations 315
10.1.0 Introduction 315
10.2.0 Offshore Structures 316
10.3.0 Risk Hazards 328
10.4.0 Certification Requirements for Offshore Installations 335
10.5.0 Essential Insurance Considerations 337
Chapter 11 Operating Insurance 2 – Physical Damage Wordings 349
11.1.0 Introduction 349
11.2.0 Issues Normally Forming Part of Declarations or Schedules 351
11.3.0 Coverage 354
11.4.0 Exclusions 361
11.5.0 Limit of Liability (Basis of Recovery) 367
11.6.0 Other Clauses 373
11.7.0 Other Clauses Customarily Included in Manuscript Policies 376
Chapter 12 Operating Insurance – 3 379
(A) FPSO and Contractors’ Vessels, Pipelines and Onshore
Land Rigs and Equipment 379
(B) General Market Practice 379
12.1.0 Introduction – FPSOs and Contractors Vessels 379
12.2.0 FPSOs and FSUs – War Risks Cover 386
12.3.0 FPSOs and FSUs – Crude Oil in Store 387
12.4.0 Pipeline Operating Forms 389
12.5.0 Land Rigs and Onshore Equipment 393
B. General Market Practice – Operational Risks 395
12.6.0 Introduction 395
Photo Gallery 405
Chapter 13 Business Interruption, Delay in Start-up and Loss of Hire 413
13.1.0 Introduction 413
13.2.0 Essential Principles and Practice – Business
Interruption Coverage 415
13.3.0 Loss of Production Income Wording (Production Loss
Sustained) JR 2005/003A) (LOPIW) 420
13.4.0 Insuring Clauses 421
13.5.0 Exclusions 428
13.6.0 Delay in Start Up (DSU) 429
13.7.0 DSU Underwriting Practice 435
13.8.0 Loss of Charter Hire and Loss of Hire 437
Chapter 14 Offshore Liability Risks 441
14.1.0 Introduction 441
14.2.0 Synopsis of Liability Exposures 443
14.3.0 Liability Policy Forms (Generically) 453
14.4.0 Excess Liability Claims Made Policy – LSW 244 457
14.5.0 Endorsement Containing Energy Exclusions – LSW 245 468
14.6.0 The LPO 418 (B) – London CGL Wording 470
14.7.0 Other Manuscript Policies 475
14.8.0 Market Practice 476
14.9.0 The Piper Alpha Litigation 478
Chapter 15 Pollution Insurance 485
15.1.0 Introduction and Background 485
15.2.0 Spillage, Clean-up and Containment 489
15.3.0 International Legislative and Voluntary Agreements 490
15.4.0 The Offshore Pollution Liability Agreement (Hereinafter
Referred to as OPOL or the Agreement) 494
15.5.0 The Outer Continental Shelf Lands Act (OCSLA) and
1978 Amendments (the Amendments) 496
15.6.0 Oil Pollution Act 1990 (OPA) 498
15.7.0 Position in Respect of FPSOs/FSUs 503
15.8.0 Insurance Coverage for Pollution Risks 504
Chapter 16 The Mutual Entities – Oil and Ocil 513
16.1.0 Introduction 513
16.2.0 Overview of Coverage and Limits Provided by OIL 517
16.3.0 Rating Formula 522
16.4.0 OIL Coverage – Construction of the Policy 525
16.5.0 Insuring Agreement 1 – Physical Damage 526
16.6.0 Insuring Agreement 2 – Sue and Labour, Control of Well,
Removal of Debris, Restoration and Redrilling Expense 533
16.7.0 Insuring Agreement 3 – Seepage, Pollution and
Contamination – Coverage 538
16.8.0 Other Main Conditions 540
16.9.0 OIL Coverage as Vehicle for Construction 543
16.10.0 Oil Casualty Insurance Limited (OCIL) 547
Photo Gallery 552
Chapter 17 War, Terrorists and Political Risk 555
17.1.0 Introduction 555
17.2.0 Drilling Barges – The Institute War and Strikes
Clauses – Hulls – Time 1.11. 95 (War and Strikes policy) 558
17.3.0 Mobile Offshore Units – Norwegian Practice under Norwegian
Marine Insurance Plan (the NMIP or the Plan) 563
17.4.0 Fixed Offshore Facilities 566
17.5.0 Onshore Terrorism 574
17.6.0 Other Political Risk Exposures and Coverages 577
Chapter 18 Decommissioning and Abandonment 579
18.1.0 Introduction 579
18.2.0 International Legislative Background 580
18.3.0 National Enactments 584
18.4.0 Abandonment Options 587
18.5.0 Insurance Products 592
18.6.0 Post Abandonment Liabilities 596
18.7.0 Provision of Decommissioning Security 597
Appendix A WELCAR 2001 599
Appendix B Energy Exploration and Development Insurance 633
Appendix C London Standard Platform Form 660
Appendix D London Market Offshore Mobile Unit Form 666
Appendix E Loss of Production Income 691
Appendix F Excess Liability Claims Made Policy – LSW 244 700
Appendix G Oil and Gas Well Drilling Tools Floater Form (All Risks) 725
Appendix H Offshore Facilities Limited Terrorist Cover, Form 2 731
Photograph Credits 734
Index 737
